The eurozone faces a deeper recession than thought, with a 0.3-percent contraction in GDP now seen for 2012 by the EU compared to 0.5-percent growth in its last November forecast.

"The unexpected stalling of the recovery in late 2011 is set to extend into the first two quarters of 2012," the European Commission said on Thursday but stressed it saw a "mild recession with signs of stabilisation."

Announcing the bi-annual forecast, European Union Economy Commissioner Olli Rehn put the figures into context by comparing to overall global growth which he expected to be 4.3 percent this year.

Unusually, the EU executive fed in data from all 27 EU states -- not just the seven biggest -- in a bid to make its forecasts more robust.

The European Commission said "modest growth is predicted to return in the second half of the year," with inflation revised "slightly upwards" to 2.1 percent across the 17-state euro currency area, mainly due to energy costs and "increases in indirect taxes."

A fifth year of recession in Greece is now expected in Brussels to result in a 4.4-percent contraction of gross domestic product in 2012.

As the Greek government pursues a 107-billion-euro ($142 billion) write-down of private debt and a fresh 130-billion-plus bailout from international backers, the figure was however better than the 5.5-percent slide forecast in December by Prime Minister Lucas Papademos.

However, Italy, which carries the eurozone's biggest debt burden of about 1.3 trillion euros, faces a recession that will cut output by 1.3 percent in 2012.

The last official forecast from the government in Rome was for a 0.4-percent fall, although the Bank of Italy last month tipped between 1.2 percent and 1.5 percent, while the IMF predicted an even worse result, a 2.2-percent drop.

"Although growth has stalled, we are seeing signs of stabilisation in the European economy," Rehn said highlighting "easing" stress in financial markets.

The Commission cited a a "less supportive" global economy "weighing on net exports" as well as low business and consumer confidence in Europe, although the forecast maintained that "a credit crunch has been avoided."